Answered: Increasing the public debt can be…

Increasing the public debt can be associated with an expansionary fiscal policy. an expansionary monetary policy. a contractionary fiscal policy. a contractionary monetary policy. 29. а. b. с. d.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter17: Federal Deficits, Surpluses, And The National Debt

Section: Chapter Questions

Problem 7SQP

See similar textbooks

Similar questions

Determine how each of the following monetary or fiscal policy would shift the aggregate demand curve. Illustrate and explain the following effect. a. Assuming the economy is currently producing above the full employment output, the government decided to increase the personal income tax as a form of contractionary fiscal policy. Illustrate and explain the effect of the policy using AD-AS curve. b. With the recession due to COVID-19, the central bank has decided to lower down discount rates and reserve requirements of the commercial bank. Illustrate and explain the effect of the policy using AD-AS curve.
What is the advantage of monetary policy over fiscal policy? O. Monetary policy can be implemented faster than fiscal policy O. Once implemented, the effect of monetary policy can be realized faster than fiscal policy O. The monetary policy affecting Investment category, which is more flexible than the Consumption and Government expenditure category O. Monetary policy is more effective at reducing the recessionary/inflationary gap
An increase in the budget deficit is the result of: A) Expansionary monetary policy; B) Contractionary monetary policy; C) Expansionary fiscal policy; D) Contractionary fiscal policy. Company tax is a: (a) Progressive, direct tax; (b) Progressive, indirect tax; (c) Proportional direct tax; (d) Regressive indirect tax. In the base year, a country produced 50 units of output at a price of R6,00 each for a nominal GDP of R300. This year it produces 60 units of output at a price of R8,00 each. What is the percentage change in real GDP since the base year? (a) 5%; (b) 10%; (c) 20%; (d) 15%.
Expansionary monetary policy and contractionary fiscal policy has a combined effect which is ________.a. a decrease in interest rate and decrease in tax ratesb. an increase in interest rate and increase in tax ratesc. an increase government spending and decrease in money supplyd. an increase in tax rates and decrease in interest rates
Fiscal and Monetary Stimulus A. Create a graph of equilibrium in the IS-LM model. Show the effect of an expansionary monetary policy. Summarize your results. B. If the central bank’s goal is to maximize output, what interest rate will we expect in equilibrium? C. Starting from the equilibrium described in (B), suppose investors experience a decrease in “animal spirits.” What happens to output? Can the central bank offset this with expansionary monetary policy? D. What could fiscal authorities do to offset the shock to animal spirits described in (C)?
1. Explain and show graphically how monetary and fiscal policies can be used in the IS-LM framework. Within a closed economy IS-LM model, analyse the effects on income, the interest rate, consumption, and investment of the following: a) A fall in the government budget deficit. Explain how your answer is affected by whether the reduced deficit comes about through a fall in government purchases or a rise in tax revenue. b) A fall in the money supply. 2. Suppose the Government wishes to reduce the budget deficit by reducing public spending while holding taxes constant. Assuming that the monetary authorities hold the money supply constant, explain why the decrease in government spending affects output more in the IS model than in the IS-LM model. Please note: To help explain your answers and analysis, you should always attempt to use diagrams, mathematical demonstration where applicable and convey the economic intuitions behind the results. Do not forget to label your graphs.
What are the advantages and disadvantages of using expansionary monetary policy or expansionary fiscal policy to restore the economy to full employment in the context of a recession's output gap, versus allowing the economy to adjust itself? a.Quicker process; increase in the price level b.No inflationary pressure; increases the government deficit c.No increase in government deficit, slower process d.No inflationary pressure; slower process
One of the main arguments against using Fiscal Policy is the crowding out effect. Suppose the government uses government purchases to stimulate the economy. Explain quantitative easing? If the Fed’s current policy is quantitative easing, do you think that there is a danger of the government’s current fiscal policy being crowded out? Why or Why not? Explanation required.
a)Using the short-hand symbols G, Y, Md, r and I to demonstrate the effects of an expansionary fiscal policy. b)Using the short-hand symbols Ms, r, I, Y, and Md to demonstrate the effects of an expansionary monetary policy. c)Using the short-hand symbols, explain the effects of a contractionary fiscal policy and a contractionary monetary policy.
(J) Which of the following statements regarding the debate over stabilization policy are correct? Check all that apply. Advocates of active stabilization believe that implementation lags for fiscal and monetary policy do not exist. Opponents of active stabilization policy believe that significant time lags in both fiscal and monetary policy often exacerbate economic fluctuations. Advocates of active stabilization policy believe that the government can adjust monetary and fiscal policy to counteract waves of excessive optimism and pessimism among consumers and businesses. Opponents of active stabilization believe that active fiscal and monetary policies have no effect on aggregate demand.
It’s probably fair to say that for many years fiscal policy has been the poor relation to monetary policy in macroeconomic policy making circles. Now it is back in vogue. In their recent assessment of the economic impact of the pandemic, the World Bank (p56, 2021) concluded, for advanced economies such as the United Kingdom (UK), that, “With monetary policy increasingly constrained, fiscal policy has taken on a critical role in macroeconomic stabilization during the crisis, delivering unprecedented stimulus in 2020 in the form of cash transfers and income support to households and firms.” Firstly, explain how monetary and fiscal policy is implemented and how they can be used to influence GDP and the price level. Secondly, the quotation above highlights the unprecedented use that has been made of fiscal policy in countries such as the UK during the crisis. Briefly consider whether fiscal policy will remain the key policy instrument in these sorts of countries in the near future.
Which of the following sequence of events occurs in response to an expansionary fiscalpolicy?a) Aggregate output decreases, causing money demand to decrease, causing the interestrate to decrease and planned investment to increase.b) Aggregate output decreases, causing money demand to increase, causing interest ratesto increase and planned investment to decrease.c) Aggregate output increases, causing money demand to increase, causing interest ratesto increase and planned investment to decrease.d) Aggregate output decreases, causing the demand for money to increase, causinginterest rates to increase and planned investment to increase.